Two banker groups sued the U.S. challenging rules that require financial institutions to report information on accounts held by nonresident aliens that may be shared with 72 foreign governments.
The Texas Bankers Association and the Florida Bankers Association, in a lawsuit filed today against the Treasury Department and the Internal Revenue Service in federal court in Washington, said the rules are discouraging investment in the U.S. by nonresidents who fear their information may be shared with the governments of countries including Egypt, Pakistan and Venezuela.
The IRS bulletin they are talking about, is the DATCA lite, which was the first step in the push for a domestic DATCA. IRS bulletin 2012-20
Update: April 24, 2013 Here is a link to the PDF lawsuit filing.
Which has now been followed by Treasury’s addition of full FATCA reciprocity (DATCA) in the Obama’s 2014 budget Analytical Perspectives: See page 202 (spacing and highlighting below for clarity)
Provide for reciprocal reporting of information in connection with the implementation of the Foreign Account Tax Compliance Act (FATCA).—In many cases, foreign law would prevent foreign financial institutions from complying with the FATCA provisions of the Hiring Incentives to restore Employment Act of 2010 by reporting to the IRS information about U.S. accounts.
Such legal impediments can be addressed through intergovernmental agreements under which the foreign government agrees to provide the information required by FATCA to the IRS requiring U.S. financial institutions to report similar information to the IRS with respect to nonresident accounts would facilitate such intergovernmental cooperation by enabling the IRS to reciprocate in appropriate circumstances by exchanging similar information with cooperative foreign governments to support their efforts to address tax evasion by their residents.
The proposal would provide the Secretary of the Treasury with authority to prescribe regulations that would require reporting of information with respect to nonresident alien individuals, entities that are not U.S. persons, and certain U.S. entities held in substantial part by non-U.S. owners, including information regarding account balances and payments made with respect to accounts held by such persons and entities.